Beyond Meat Short-Squeeze Setup Faces Weak Margins and Bearish Analyst Outlook

Following Robinhood’s popularization of commission-free retail trading, combined with the coordination potential of social media, the short squeeze left the realm of esoteric hedge fund maneuvers and entered the mainstream.

Retail investors realized that if enough people bought and held a stock, they could force a short squeeze – compelling hedge funds to buy back shares at escalating prices – as we’ve seen plenty of times with GameStop.

But after buying 4,710 BTC this May, GameStop’s position is less squeezy. In contrast, these two stocks have some potential for a short squeeze repeat.

Beyond Meat Inc.

Since its launch in 2012, the California-based company has run four generations of meat substitute products. In April 2024, the company announced a major upgrade with Beyond Burger and Beyond Beef, adding superior avocado oil instead of ultra-processed seed oils, improving protein profile and simplifying ingredients.

Unfortunately, Beyond Meat continues the industry-wide practice of pricing its alternatives higher than the products they aim to replace. For Q2 earnings delivered in early August for the period ending June 28, the company reported nearly 20% drop in year-over-year revenue to $75 million.

More importantly, its gross margin decreased from 14.7% to 11.5% in the same period. In total, the company suffered a $29.2 million net loss, somewhat lower than the $34.5 million net loss in the year-ago quarter. Mid-September, Beyond Meat launched Beyond Burger 6-Pack, specifically aimed at value consumers to attempt to rectify the pricing issue.

At the same time, the company reduced its workforce by 6% in an effort to increase its margins. On November 4th, Beyond Meat is scheduled to deliver its Q3 earnings report. According to 5 analysts’ forecasts from Yahoo Finance, the consensus earnings-per-share (EPS) forecast is negative $0.4, the same as in the year-ago quarter. Wall Street Journal’s forecasting is bearish with 5 analysts on the “sell” side, zero on the “buy” side and 3 on “hold”.

Against the press time price of $5.68, the average Beyond Meat price target is $2.33 per share. The bottom outlook for the Beyond Meat stock goes as low as $0.80, while the ceiling price target is $4 per share.

Year-to-date, Beyond Meat shares are up 40%, driven by a massive 648% price surge over the week. At the end of September, average daily share volume of Beyond Meat shares surged 5x from mid-September. Suffice to say, at the current price range, this may be a good time to lock in profits.

Krispy Kreme Inc.

After ending its partnership with McDonald’s in July, Krispy Kreme’s business model suffered a heavy blow. Increased operating costs led to $28.9 million in lease impairment and termination costs, on top of $22.1 million in asset charges.

As a result, the company reported a net loss of $441.1 million in Q2 from net income of $6.9 million in the year-ago quarter. During this period, Krispy Kreme’s net revenue dropped 13.5%, largely owing to the exit from Insomnia Cookies Holdings, LLC.

The company’s turnaround plan is centered around three pillars: refranchising, reducing capital intensity, and expanding margins by outsourcing logistics. Zacks Investment Research’s 3 analysts project an average EPS of negative $0.06, equal to the year-ago quarter.

From mid-September to end-September, average daily Krispy Kreme share volume nearly doubled. Year-to-date, Krispy Kreme stock is down 52%, but having gained 40% over the last week. Against the press time Krispy Kreme price of $4.55, the average price target is $3.84 according to Wall Street Journal.

Most analysts rate the stock as “hold.” The downside outlook for Krispy Kreme shares is much more favorable compared to Beyond Meat, at $2.50, while the ceiling price target for Krispy Kreme stock is $6 per share. The company’s next earnings report is scheduled for November 6th.

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